News Summary
The South Carolina House of Representatives has passed House Bill 4216, aimed at overhauling the state’s tax structure to reduce income tax brackets and potentially work toward a 0% income tax rate in the future. This bill introduces two tax rates for income up to $30,000 and above, while retaining certain deductions for Social Security and military retirees. Supporters believe these changes will foster economic growth, though some filers may face higher taxes. The bill, now moving to the Senate, proposes significant changes in the state’s fiscal landscape.
South Carolina has taken a significant step towards tax reform, as the House of Representatives passed House Bill 4216 on May 7, 2025. This bill outlines plans for a revamped tax code that could potentially simplify and lessen the income tax burden on residents, with aspirations for a possible 0% income tax rate in the future.
The legislation reduces the number of income tax brackets from three to two, introducing a tiered structure where individuals earning up to $30,000 will pay a tax rate of 1.99%, while those with incomes above $30,000 will incur a 5.39% tax rate. This reconfiguration aims to align South Carolina more closely with neighboring states and to establish a long-term vision of gradually eliminating the income tax as state revenues grow.
Currently, the tax landscape in South Carolina has been marked by a top income tax rate of 6.2%, which is the highest in the Southeast. Among the current proposals, the bill includes taxation reforms while retaining deductions for Social Security and military retirement income, aimed at alleviating the tax burden specifically for retirees and families.
Supporters of the reform, including the National Federation of Independent Business (NFIB), commend the General Assembly’s efforts to create pro-growth tax reform. Small business owners have voiced their need for a simpler tax process that would encourage reinvestment in their enterprises. Previous tax discussion proposals had raised concerns over potential increases for most filers; however, this current bill seeks to address those issues by redistributing the tax burden more equitably.
In financial terms, the implementation of House Bill 4216 may lead to a $400 million decrease in tax revenue during its first year. This figure is nearly double the reduction that was anticipated in earlier drafts of the bill. The bill also introduces an individual deduction of $15,000 for filers earning up to $40,000, which would gradually diminish for higher income groups, thus catering to lower and middle-income earners more effectively.
Despite these advantages, the new tax structure could result in tax increases for approximately 24% of filers, while over 40% might benefit from tax reductions, and about a third will see no change at all. Concerns have emerged from various quarters about whether these changes will disproportionately affect specific groups of taxpayers.
The passage of this bill through the House was secured with a vote of 68 to 46 after a comprehensive hour-long debate. House leaders attributed the advancement of the proposal to the efforts of key committee members involved in the negotiation process, specifically highlighting the contributions of Chairman Bruce Bannister and Representative Brandon Newton.
The bill not only reassesses tax calculations by switching to adjusted gross income, but it also aims to update withholding tables, which are expected to correct the state’s history of over-collecting taxes from workers’ paychecks. This reform sets the stage for future discussions in the Senate, which will have the opportunity to consider similar tax legislation during its session in 2026.
Additionally, several amendments had been proposed to reduce the income tax rate to zero immediately, but these were ultimately dismissed during the legislative process. This indicates the complexity and contentious nature of tax reform discussions in South Carolina, balancing between prioritizing state revenues and establishing a fair tax framework.
In conclusion, House Bill 4216 represents a critical shift for South Carolina’s tax system, with potential long-term benefits aimed at enhancing economic growth and fairness for taxpayers. As the state moves forward with this reform, the implications for residents’ financial responsibilities will require close monitoring and adjustment to ensure that the intended outcomes are achieved.
Deeper Dive: News & Info About This Topic
- Live 5 News
- NFIB
- SC Daily Gazette
- Encyclopedia Britannica: Tax Reform
- Governing
- Google Search: South Carolina income tax reform
Author: STAFF HERE ROCK HILL
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